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Unlocking the Benefits of IP Box in Quebec

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Unlocking the Benefits of IP Box in Quebec

Driving Innovation with IP Tax Incentives

Intellectual property (IP) rights, including patents, copyrights, and plant breeders’ rights, are essential tools for safeguarding innovations derived from research and development (R&D). To foster local investment in R&D and promote economic growth, many governments have introduced tax incentives known as “IP boxes” or “patent boxes.” These programs provide tax advantages tied to commercially valuable IP. In Canada, Quebec leads the way as the first jurisdiction to implement an IP box incentive. Below, we explore the key features of the Quebec IP Box and how companies can leverage these benefits and enhance their return on innovation investments.

What is the Quebec IP Box?

The Quebec IP Box, officially called the Incentive Deduction for the Commercialization of Innovations (IDCI), was introduced in 2016 and refined for tax years starting after December 31, 2020. It allows qualified corporations to reduce their Quebec tax rate on eligible income tied to a qualified intellectual property asset (QIPA) from 11.5% to as low as 2%.

Who qualifies?

A “qualified corporation” must:

  • Operate a business with an establishment in Quebec.
  • Conduct R&D activities in Quebec.
  • Earn income from the commercialization of QIPAs either in Quebec or globally.

What qualifies as a QIPA?

Eligible QIPAs include:

  • Patented inventions or those under a certificate of supplementary protection (filed after March 17, 2016).
  • Computer programs protected by copyright (created after March 10, 2020).
  • Plant varieties under plant breeder’s rights (requested after March 10, 2020).

What income qualifies?

Income derived from QIPAs must be attributable to a Quebec establishment and can include:

  • Revenue from the sale, rental, or lease of QIPA-related products.
  • Fees for services intrinsically tied to the QIPA.
  • Royalties or licensing income from QIPA usage.
  • Damages from litigation related to QIPA infringement.

A direct link between Quebec-based R&D and the creation, development, or improvement of QIPAs is required.

Advantages of the Quebec IP Box

The Quebec IP Box offers substantial tax savings across diverse industries. Key benefits include:

  • Broad applicability: The IDCI extends beyond traditional manufacturing to sectors such as software development, gaming, cloud services, artificial intelligence, biotechnology, and agriculture, including cannabis production.
  • Global reach: Income from sales in other countries and patents filed outside Canada can still qualify.

Maximizing the Quebec IP Box

To fully capitalize on the IDCI, businesses should adopt a coordinated strategy that integrates IP management with tax planning. This should include consulting with Ayming to ensure compliance, optimize claims, and minimize risks. Proactive planning can position companies to maximize returns on their R&D investments while navigating the complexities of IP taxation.

Ayming Canada’s expertise in funding and tax optimization can support your business in navigating programs like the Quebec IP Box. Contact us today to learn how we can help you unlock the full potential of your innovations.

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